Deep Voodoo

By ROGER LOWENSTEIN

Published: September 23, 2007

THE BIG CON

The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics.

By Jonathan Chait.

294 pp. Houghton Mifflin Company. $25.

Five years into the Iraq war, it is hard to remember that George W. Bush once was controversial for something that had nothing to do with terrorism or the Middle East. But in ''The Big Con,'' Jonathan Chait reminds us that Bush will also leave an economic legacy, and it is as radical and, he argues, as wrongheaded as anything his administration has managed overseas.

Chait, a senior editor at The New Republic who writes the magazine's TRB column, argues that a band of ideological zealots succeeded in capturing first the Republican Party and then, by poisoning the political process, Washington itself. Though their true agenda, tax cuts for the rich, was both economically unsound and politically unpopular, Chait writes, Bush and his conservative foot soldiers deceived the public and the press before pushing their policy -- four huge tax cuts in six years, in case you lost count -- on an enfeebled and corrupted Congress.

Any writer who accuses his adversaries of being paranoid extremist nuts (epithets like this appear frequently in the book) runs the risk of seeming like a paranoid extremist nut himself. But Chait sets out to disarm us on the first page. ''I have this problem,'' he begins. ''Whenever I try to explain what's happening in American politics ... I wind up sounding a bit like an unhinged conspiracy theorist. But honestly, I'm not.'' And he isn't. Chait attacks the tax-cutters' agenda from a sensible middle ground -- the terrain he laments has been largely lost in American politics and completely abandoned by the Republican Party.

By middle ground, I don't mean that Chait simply splits the difference between, say, Newt Gingrich and Robert Rubin. This is the approach, he ruefully observes, of most of the Washington press corps, and it is one of the secrets of the Republicans' success. Reporters mechanically grope for the ''middle,'' but when one party is veering rightward, the middle is, too.

Instead, what Chait does is to examine the tax cuts on their economic merits. The debate is not new, but Chait's tale is enlivened by his account of how the G.O.P. evolved from a party of strait-laced budget balancers to extremists who resemble old-time Marxists in their rigid adherence to doctrine.

The story begins in the 1970s, when America's poor economy exposed the limits of the New Deal/Great Society welfare state. Arthur Laffer, a consultant who had left the government ''in disgrace,'' Chait says, after making a wildly wrong calculation of the 1971 G.D.P., argued that large tax cuts would so stimulate growth that even more revenue would flow to the Treasury. His theory was embraced by Jude Wanniski, an editorial page writer at The Wall Street Journal, who would later defend Louis Farrakhan and compare Slobodan Milosevic to Abraham Lincoln. Other devotees of Laffer's ideas, like George Gilder, were decidedly on the fringe as well.

Chait exploits the eccentricities of this gang to cast doubt on their economics, a questionable tactic, but he rightly observes that the Laffer curve, better known now as supply-side economics, was promoted mostly by opinion writers and not by mainstream economists. In any case, Wanniski converted Representative Jack Kemp, and Kemp converted Ronald Reagan. Chait does not argue that the huge Reagan tax cuts were ill-advised. What he regards as ''deranged'' is the view that tax cuts are always and everywhere the best response.

When Reagan was elected, marginal tax rates were 70 percent, a level Chait concedes may well have been a disincentive. Reagan cut the top rate to 28 percent, an epochal reduction that almost certainly did get capitalist juices flowing. But later, when deficits ballooned, supply-siders argued that deficits didn't matter or just explained them away. The editorial page of The Wall Street Journal began referring to ''the deficit'' in quotation marks, Chait observes, ''as if the whole thing were a liberal myth.''

Reagan himself was not so doctrinaire. He eventually raised taxes, as did George H. W. Bush and Bill Clinton, though rates never again topped 40 percent. As long as taxes are kept beneath that level, Chait argues, they will not affect economic behavior, and the precise level does not much matter. He also argues that the Clinton tax increase, by eliminating the deficit, helped pave the way for the strong economy of the '90s -- a far more tenuous claim. It is easier to prove that Clinton did not do the economy harm than that he did it good.

But Chait is right on his main point: there is no historical basis for treating tax rates as the sole determinant of economic performance. Nonetheless, this was the approach of the New Right, which dutifully blamed high taxes for everything from market hiccups to the Great Depression.

Chait's account of how the G.O.P. banished dissent on this issue is riveting. First, Bush p? was all but purged for approving the mildest of tax increases in 1990. The 1996 nominee, Bob Dole (hardly a supply-sider), had to make a craven promise to be ''another Ronald Reagan'' -- meaning a tax-cutter. That was hardly accidental. The antitax crusader Grover Norquist spent a lot of time ''working with the conservative press to make sure that we're all thinking alike and talking alike.'' John McCain dissented from the tax orthodoxy, even voting against Bush's tax cuts in 2001 and 2003, but he was so pummeled for it that he hired Laffer as a consultant on his 2008 campaign and embraced supply-side nostrums.